New websites crowdsource development ideas

GGW's I Wish This Were series of posts imagined better uses for vacant properties and bad public spaces. 2 entrepreneurial DC brothers have taken this concept to the next level, with websites that harness the power of crowdsourcing to help shape neighborhood development.

Photo by Payton Chung on Flickr.

Ben and Daniel Miller, sons of Gallery Place developer Herbert Miller, created 2 crowd­sourcing websites. Popularise, unveiled in December, lets residents vote on development ideas, and Fundrise, its 2-month-old cousin, lets them invest in businesses and developments.

The services started in DC and are also available for Baltimore, Oklahoma City, Seattle, and Mandurah, Australia, with more cities on the way.

Popularise lets local developers and small businesses post project proposals and receive public input. Users can submit ideas for what they would like to see in these developments, and read ideas submitted by others. If you like someone else's idea, you can click "Build it!" to vote for it, and the developer may incorporate the ideas that get the most votes.

In addition to developers, property owners may solicit advice from Popularise users. The site lets owners post a chalkboard in front of their properties that asks "What would YOU build here?" or "How would you build your city?" This is another variation on the meme developed in post-Katrina New Orleans, where people were given "I wish this were [blank]" stickers and invited to stick them on boarded-up buildings to send a message to their owners.

The Miller brothers began looking at commercial real estate 2 years ago, relying on traditional funding sources such as private equity firms and accredited investors. But they realized that these investors didn't really know the neighborhoods they bought into. So they came up with a new business model that relies on small investments from people who live and work around the property in which they choose to take a stake.

Ben Miller cautions developers against taking the word of the majority of Popularise users as final, calling it "a conversation, not an election." "The most popular girl in school is not necessarily the girl you want to be married to," he explained. "People may not see that the fifth most popular idea could actually be best for the area."

The newer site launched by the Miller brothers offers users the chance to actually put their money behind their votes. Fundrise is a "place-based investment platform." For even small dollar amounts, people can buy shares of ownership in real estate or businesses. Investors help the kinds of venues they want to get off the ground, as well as hopefully to earn a return.

Fundrise finds business opportunities that they think people in the community will be excited about and manages people's investments in them, including distribution of dividends and regular financial reporting, plus investor perks. Like stocks and mutual funds, the Securities and Exchange Commission regulates investments in Fundrise projects.

Fundrise's first project is the creation of a "curated culinary and fashion boutique," called Marketto, at 1351 H Street NE. Marketto will give many local vendors a place to market their food and clothing. Fundrise has raised $216,300 for the project so far, about 65% of their goal of $325,000. Fundrise will pay dividends to investors from the rent that Marketto pays to building owner Fundrise 1351.

If the Popularise and Fundrise concept expands, it will give citizens the power to be proactive when it comes to what is built in their city, rather than just reactive to whatever big developers propose. With tools like this, people can actually shape the kind of development they want in their cities. For example, if you want to see a small healthy food market near you instead of a mini-mart, you can get like-minded fellow citizens together to invest in one.

People in our region increasingly choose vibrant, walkable places that are connected by public transportation and bicycle networks. If more developers and businesses follow the Miller brothers' lead, neighborhood people-power can further drive the decision making progress, and more residents will get what they want.

Malcolm Kenton lives in the DCís NoMa neighborhood. Hailing from Greensboro, NC and a graduate of Guilford College, he is a passionate advocate for world-class passenger rail and other forms of sustainable transportation, and for incorporating nature and low-impact design into the urban fabric. The views he expresses on GGW are his own.

Comments

Sounds interesting. Though I wonder how much you get to say in how the business is controlled in the fund raising site. Maybe it says so clearly on the site that I missed but it looks like that it is unique to each investment opportunity which adds complexity but seems more secure than a boilerplate agreement. But I'm no expert by any means but I am wary about basically going into business with people I don't know and may never meet.

And of course, the best way to support small businesses is to shop at them more than you shop at other places.

I'm all for new and different concepts, but the Fundrise idea is a recipe for disaster, overly idealistic and not scalable. It's gotten a ton of press from the lay-person community because of its community-based approach and seeming simplicity, but this will not work.

How heavy excessive are the fees to set up this investment model on such a small investment? How do you propose to deal with the myriad of pitfalls that can befell any risky investment? What's the means of recourse for the investor? How does this capital structure impair the ability of the investment or property owner from refinancing the property down the line? What's the exit strategy? Who has a say in business decisions? is there a board? There questions are just the tip of the iceberg.

There are a myriad of investment vehicles for real estate (REITs, LLCs/limited partnerships, fund models, etc.) that exist, are efficient and scalable. This model is a niche opportunity at best that raises a lot of questions and concerns to a savvy real estate investor.

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